My challenges with the streaming services

[abefroman329]

I've already been a big proponent of buying physical video games, but video games are much more difficult to deal with due to frequent updates.

Also, you can buy a secondhand physical copy of the game at a discount, but you'll buy an electronic version for whatever they feel like charging you.

[Ted$8roadFan]

The media industry (cable, streaming, and everything else) is in chaos, to no one's surprise.

https://www.cnbc.com/2023/07/17/media-industry-turmoil-strikes-streaming-losses-ad-slump.html

If, as the article implies, the combination of declining but profitable traditional TV and cable; the thriving but money-losing streaming services; the continued decline of moviegoing; sinking ad revenue; and not one, but two major strikes; will lead to consolidation and IMO more sensible streaming options. I might even consider supplementing my Netflix subscription.

[fhmiii]

I think it's safe to say that a la carte hasn't been what people were envisioning.  The way people were talking, I think we were envisioning something along the lines of taking the existing cable bill, dividing it per channel, and then paying only for the specific individual channels we wanted.  Instead things got bundled and the prices went up.  For the cable bill, instead of paying just for Cartoon Network, you instead have to buy a "kids" bundle that has it along with a bunch of other channels.  And for streaming, the idea is that you get a studio's full library, except you inevitably don't even though they make you pay the same as you would have paid for Netflix back when Netflix had everything (plus a DVD plan), and still serve you ads.

I think a la carte was what people wanted when it was cable channels.  In 2005, I'd have been angry if my cable package didn't come with Discovery Channel and History Channel.  These days I couldn't care less about either one of those (as they've gone mostly to "reality" TV shows), but I'd want Science Channel.  But while Discovery and History usually come with "basic" cable, Science Channel requires an add-on, as you describe.  A la carte was supposed to give us the option to ignore the 60-channel Basic Cable package and just buy the ten or fifteen channels we actually regularly watch.

The hope with streaming was that everything would be pushed out through aggregator streaming services like Hulu, Netflix, and Prime Video.  At the start, that was what happened, but then things changed.  Now instead, every production house now has its own streaming service that they're charging $7.99 to $15.99 per month, and once again you're mostly paying for content you're not interested in and having to buy multiple packages to get everything you want.  See above where my wife insists we have almost a dozen streaming services.  That now costs almost as much as the cable package with internet used to cost, but now I'm paying for internet service on top of that.

[Rothman]

One thing I've heard some people complain about with regard to streaming services is that it takes longer to start things up when you want to watch TV. Instead of turning it on and then going to the channel you want, you have to turn on the TV, open the appropriate app, wait for it to load, tune to the appropriate network or program, etc. I can understand why some people find that annoying when all you want to do is, say, turn on the 11:00 news while you're getting ready for bed.

I do miss having the ability to channel-surf.  Before I cut the cord altogether, I had a cable package that just included the local OTA channels, but being able to flip through those few channels was enough.  Sometimes I just want to watch something for a few minutes and I don't want to have to think about what I want to watch, or figure out where I need to go to stream it, etc.

And I hoped I'd get a similar experience from Pluto, but, alas.

If you miss channel surfing, TikTok is for you.  Same thing.

TikTok is most certainly not for me.

Sure it is.  Just swipe through the creators like they're channels.  It's very similar.

[fhmiii]

I think it's safe to say that a la carte hasn't been what people were envisioning.  The way people were talking, I think we were envisioning something along the lines of taking the existing cable bill, dividing it per channel, and then paying only for the specific individual channels we wanted.  Instead things got bundled and the prices went up.  For the cable bill, instead of paying just for Cartoon Network, you instead have to buy a "kids" bundle that has it along with a bunch of other channels.  And for streaming, the idea is that you get a studio's full library, except you inevitably don't even though they make you pay the same as you would have paid for Netflix back when Netflix had everything (plus a DVD plan), and still serve you ads.

It's weird.  The transition of music to the internet went great for people, but the transition of movies/TV went horribly.  I think that's because music went forced and the industry was forced to conform to the whims of the internet, whereas Hollywood got to learn from what happened to the movie industry and was instead able to force the internet to conform to the whims of the production companies.

. . .

So if someone was paying $50 for cable because their reservation price was $60, but all their utility came from say Cartoon Network, than their reservation price for Cartoon Network is $60. Guess what the cable company charges them under perfect price discrimination? Yep, $60. So they are getting a single channel, and paying more.

Not quite.  No one's "reservation price" for Cartoon Network is $60 (well, okay, maybe some billionaire out there, but c'mon).  If their cable package is $50, and Cartoon Network drives that decision purchase, the actual reservation price for CN is probably something like $10 or $15.  The remaining $35 to $40 is paid because of the supply surplus, which is part of the reason bundles are so effective: the customer feels like they're getting more, so they're willing to pay more, even if it's not entirely valuable to them.  They figure every once in a while they're turn on the Weather Channel or something.  Few people turn down the free toaster, even if it's cheap junk and that's not why they went to the car dealership, anyway.  This is the internal disconnect between perceived utility and actual utility.  If the cable company attempted to charge the customer $60 just for Cartoon Network, the customer would most likely balk at the idea.

Look at MLB.TV.  The difference in cost between a single team package and the full package is minimal.  Last I checked, it was something like $20 over the course of a season.  For some people that's enough, and there are many people getting single-team packages, but most people just buy the full MLB.TV subscription even if they're only watching one team.

Add to that, all economic decisions are made on the margin.  If the choice is between a $50 cable package that includes Cartoon Network and a bunch of channels you don't care about, and not having the Cartoon Network option at all, then many people will opt for the package because they perceive, at that moment, that having cable TV is more important than saving the money they're spending for the "excess" channels.

I'd have been willing to go with an a la carte cable package back in the day, if it included ESPN, Science Channel, my local TV channels...  and that's really about all I wanted.  Maybe I'd have gotten History, FX, and/or TNT, but I'm not sure I would have.  If that cost me $30 ($8 for ESPN, $2 for Sci, $5 for local broadcast, and $15 as a "service access fee") instead of $95 for for the third-tier package that includes 8 channels I might watch one day and 285 channels I would never watch, all just so I could get Science Channel, I'd have jumped at it.  That was never an option, so I never upgraded and for many years I just didn't have cable (my neighbors and friends and local sports bars all had ESPN, so I just went to them to watch college football).

Sling comes closest to this by offering add-on packages, but it's still not quite what I really want.  $5 per month for 29 sports channels I might rarely watch kinda' sucks when all I want to add is SEC Network, for which I'd gladly pay $3 per month a la carte.  The $2 extra that I'm paying?  I might check out a Big Ten or PAC12 game I might not otherwise have watched.

[Scott5114]

The problem with that is that prices are set buy what a buyer will pay. Let me repeat that prices are set buy what a buyer will pay.

So since I'm only willing to pay $0.00 for it, they'll give it to me for free?

No, if your reservation price is $0, then you do not consume, and hence you are not a buyer.
The point of saying that prices are set buy what a buyer will pay is to make clear that costs do not determine price except to set a floor under it. It does not say everyone pays what they want, it says that the market clearing price will rise to what a buyer will pay (though for this to be a long term equilibrium that must be in excess of the total cost to supply). That buyer can be any buyer, and includes people that outbid you.

Eh, thinking a little, I'd pay five cents for it.

So they'll give it to me for five cents is what you're saying? If not, then the prices are not set by what a buyer will pay.

[HighwayStar]

Actually few Americans are waiting for that. This is a recent headline from the ITIF
The majority of Americans can access speeds above the FCC's baseline; in 2019, 92 percent of the U.S. population had access to fixed broadband at 100/10. In 2020, 25 percent had access to highly superfluous gigabit speeds, on par with South Korea.

That's 8% that don't have access. A significant number, especially when you take into consideration that some of these places have no plans to extend broadband to rural areas. Satellite sucks, and most work at home jobs will not allow you to work if that's all you have.

Then move out of the boondocks and into civilization, if it means that much to you.

"I want to live in the country where I can get away from it all...Wait, I didn't mean that..."

Agreed. That 8% is some pretty out of the way places. During covid, I worked on internet that may or may not have been considered as "broadband" but it was fast enough for work from home.

This reminds me of when I used to frequent a cordcutting forum. The obsession with internet there was absurd. People claiming that every house needed gigabit speed because "work from home" or "education", it was such utter BS. YouTube specifies 5 Mbps per second for HD video, only 1.1 Mbps for SD (which is more comparable to what most video conferencing looks like). The vast majority of households would be fine for education and work from home with 30 Mbps.

[HighwayStar]

The problem with that is that prices are set buy what a buyer will pay. Let me repeat that prices are set buy what a buyer will pay.

So since I'm only willing to pay $0.00 for it, they'll give it to me for free?

No, if your reservation price is $0, then you do not consume, and hence you are not a buyer.
The point of saying that prices are set buy what a buyer will pay is to make clear that costs do not determine price except to set a floor under it. It does not say everyone pays what they want, it says that the market clearing price will rise to what a buyer will pay (though for this to be a long term equilibrium that must be in excess of the total cost to supply). That buyer can be any buyer, and includes people that outbid you.

Eh, thinking a little, I'd pay five cents for it.

So they'll give it to me for five cents is what you're saying? If not, then the prices are not set by what a buyer will pay.

Ironically, I figured you would say basically that, and typed out half of the pre-emptive response, but then thought I would deal with it tomorrow, so here we are.
Again, see the above where I say

"It does not say everyone pays what they want, it says that the market clearing price will rise to what a buyer will pay (though for this to be a long term equilibrium that must be in excess of the total cost to supply). That buyer can be any buyer, and includes people that outbid you."

You only pay 5 cents if no one is willing to pay more, and that will only be sustainable if the total cost of providing to you is less than 5 cents. If someone is willing to pay more, then prices are set by that person.

Keep in mind this is for a single sale, when we talk quantities then price is set buy what buyers as a whole are willing to pay, ie. a demand curve.

[HighwayStar]

Not quite.  No one's "reservation price" for Cartoon Network is $60 (well, okay, maybe some billionaire out there, but c'mon).

Not sure how you know that, but it really makes no difference to the economics, it just makes the example easier to understand.

If their cable package is $50, and Cartoon Network drives that decision purchase, the actual reservation price for CN is probably something like $10 or $15.  The remaining $35 to $40 is paid because of the supply surplus, which is part of the reason bundles are so effective: the customer feels like they're getting more, so they're willing to pay more, even if it's not entirely valuable to them.  They figure every once in a while they're turn on the Weather Channel or something.  Few people turn down the free toaster, even if it's cheap junk and that's not why they went to the car dealership, anyway.  This is the internal disconnect between perceived utility and actual utility.  If the cable company attempted to charge the customer $60 just for Cartoon Network, the customer would most likely balk at the idea.

Nope, this is just economics gibberish.

If their reservation price does not exceed the price of cable they do not consume, period. Your premise is that you somehow know better what their reservation price and utility is than they do. This is just semantics. No matter how you dice it, they have a reservation price for cable of $60. Now if $20 of that is actually CN and the other $40 is the rest of the package then so be it. But basically the argument that they are being duped by the bundle and their real reservation price is not $60 is nonsense. You may not think they get enough utility for the rest for that to work, but they make that decision, not you. If the mental peace of knowing they have 59 other channels to watch in case CN fails them is worth $40 to them then so be it, its not something I can question because I don't have their preferences. (Mind you, I would agree with you that the other channels are not worth that in my utility function, which is why I never had cable until It came with the internet)

Look at MLB.TV.  The difference in cost between a single team package and the full package is minimal.  Last I checked, it was something like $20 over the course of a season.  For some people that's enough, and there are many people getting single-team packages, but most people just buy the full MLB.TV subscription even if they're only watching one team.

That example actually proves my point so lets examine it a bit.

Suppose we have 20 teams, and 200 consumers. It costs $20 for the full package, $19 for a single team.
If each team has 9 fans, who have a reservation price of $30 to see their team, and a reservation price of $2 to see other teams, they buy the full package, because their surplus is $12 versus $11 when they buy the single team package.
Assume the other 20 people are super fans who have a reservation price of $30 to see their team, and a reservation price of $0 to see other teams, they buy the single team package.
As you can see, that fits the results you describe while still showing that no one has more than a token reservation price for the other channels.

So as you said The difference in cost between a single team package and the full package is minimal. Which is exactly my point. A la carte is not meaningfully cheaper because people are already paying for what they value, and the rest is just along with the ride.

Add to that, all economic decisions are made on the margin.  If the choice is between a $50 cable package that includes Cartoon Network and a bunch of channels you don't care about, and not having the Cartoon Network option at all, then many people will opt for the package because they perceive, at that moment, that having cable TV is more important than saving the money they're spending for the "excess" channels.

Okay...so when the choice is between the package with CN, and no CN at all, many people will opt for the package because they like cable TV? Not sure that there is any marginal component of that statement. Also, if all of those people had $60 reservation prices for CN then they would all buy the package, not because they cared at all about cable, but because they care about CN.

I'd have been willing to go with an a la carte cable package back in the day, if it included ESPN, Science Channel, my local TV channels...  and that's really about all I wanted.  Maybe I'd have gotten History, FX, and/or TNT, but I'm not sure I would have.  If that cost me $30 ($8 for ESPN, $2 for Sci, $5 for local broadcast, and $15 as a "service access fee") instead of $95 for for the third-tier package that includes 8 channels I might watch one day and 285 channels I would never watch, all just so I could get Science Channel, I'd have jumped at it.  That was never an option, so I never upgraded and for many years I just didn't have cable (my neighbors and friends and local sports bars all had ESPN, so I just went to them to watch college football).

So if you could get something for your reservation price you would buy it in other words, which is exactly my point. Now in your case, your reservation price was very low, probabally lower than market clearing prices, so no such a la carte package would have been offered. The only way the cable company would let you have ESPN for $30 would probabally have been if they accomplished first degree price discrimination via some mind reading technology built into your set. But barring that if they came along to offer a la carte the package you describe would almost certainly have been more than $30.

[Roadgeekteen]

I'm not paying for streaming services besides spotify. My family pays for a bunch (including spotify) but if I want to watch something Pittsburgh's MLB team exists.

[Bruce]

Regarding internet access: there's a donut hole effect forming in Washington. Urban areas generally have good connections due to competition, while rural areas have subsidies and public broadband services that are building out ever-larger fiber networks. I passed by dozens of signs in rural Washington this past weekend advertising rural fiber.

Meanwhile in the suburbs, we're stuck with monopolies and slow rollouts of higher speeds. And no subsidies to help.

[Rothman]

My graduate economics professor would burn this thread if he could...

[zachary_amaryllis]

I just can't stream. Hughesnet 'sort of' works, but it glitches out, and about half the month I'm in 'throttled' mode. Every time it rains more than a sprinkle, the internet either goes completely away, or slows down to the point of unusability. In the evenings, it's possible to have 30+ second (not ms, SECONDS) ping times.

I've ripped every DVD I've ever owned, rented, or borrowed, and shoved it all onto the Plex server. Plex 'can' stream, whatever content it offers, but what made it work for me, is that if you have locallly-stored content, no internet required to use it, and it works on every TV in the house.

[vdeane]

Regarding internet access: there's a donut hole effect forming in Washington. Urban areas generally have good connections due to competition, while rural areas have subsidies and public broadband services that are building out ever-larger fiber networks. I passed by dozens of signs in rural Washington this past weekend advertising rural fiber.

Meanwhile in the suburbs, we're stuck with monopolies and slow rollouts of higher speeds. And no subsidies to help.

Interesting.  Upstate NY is largely the opposite: suburbs have fiber, urban areas are stuck with monopolies, and rural areas are stuck with satellite.

[zachary_amaryllis]

Regarding internet access: there's a donut hole effect forming in Washington. Urban areas generally have good connections due to competition, while rural areas have subsidies and public broadband services that are building out ever-larger fiber networks. I passed by dozens of signs in rural Washington this past weekend advertising rural fiber.

Meanwhile in the suburbs, we're stuck with monopolies and slow rollouts of higher speeds. And no subsidies to help.

Interesting.  Upstate NY is largely the opposite: suburbs have fiber, urban areas are stuck with monopolies, and rural areas are stuck with satellite.

There has to be some economy of scale or something I don't get with all this.

Where I sit, about 20 miles out of Fort Collins, all you can get is satellite. But if one goes 20 miles or so further up the canyon, i.e. further out of town, one can get DSL via the phone company, and there's even some places with cell signal.

Cell signal at my house, is because a neighbor has some thing that <oversimplify>inhales internet, emits 4g</oversimplfiy>. I know it's via either Hughes or Viasat, because it has that usual laggy feel to it.

[ZLoth]

And, this is why I double and triple checked the Internet availability of the home I was purchasing when I moved back at the beginning of 2019. Especially when, for several years, all that I had available is 15Mbps down/3 Mbps up Internet.

[HighwayStar]

My graduate economics professor would burn this thread if he could...

Only portions of it. Some of this is literally verbatim out of my favorite Economics professor's mouth.

[HighwayStar]

Regarding internet access: there's a donut hole effect forming in Washington. Urban areas generally have good connections due to competition, while rural areas have subsidies and public broadband services that are building out ever-larger fiber networks. I passed by dozens of signs in rural Washington this past weekend advertising rural fiber.

Meanwhile in the suburbs, we're stuck with monopolies and slow rollouts of higher speeds. And no subsidies to help.

Subsidizing it in rural areas is just another example of bad policy, its value is not inverse to population density, quite the opposite.

[Rothman]

My graduate economics professor would burn this thread if he could...

Only portions of it. Some of this is literally verbatim out of my favorite Economics professor's mouth.

Well, yes, "some."  The discussion was like watching what would have happened if Prometheus gave fire to a pyromaniac first.

[brad2971]

Regarding internet access: there's a donut hole effect forming in Washington. Urban areas generally have good connections due to competition, while rural areas have subsidies and public broadband services that are building out ever-larger fiber networks. I passed by dozens of signs in rural Washington this past weekend advertising rural fiber.

Meanwhile in the suburbs, we're stuck with monopolies and slow rollouts of higher speeds. And no subsidies to help.

Subsidizing it in rural areas is just another example of bad policy, its value is not inverse to population density, quite the opposite.

It's a good thing this attitude didn't exist around, say, the 1930s-50s. Large parts of rural America would not have been able to obtain electricity without the Rural Electrification Act due to then-horrible Return on Investment.  And frankly, it's a good thing that rural telecom cooperatives aren't listening to what a "bad policy" it is to invest in fiber: https://sdncommunications.com/services/broadband-internet

[kkt]

There's not a free market in streaming services.  Any given area has only one cable provider, so the customer's choices are just take it or leave it.  No competition on price or service, and the prices and services available reflect that monopoly position.

[vdeane]

There's not a free market in streaming services.  Any given area has only one cable provider, so the customer's choices are just take it or leave it.  No competition on price or service, and the prices and services available reflect that monopoly position.

This thread is about streaming services like Netflix, Hulu, etc., not ISPs (internet service providers).  Although there really isn't a free market for those either, given how many things are "original" or exclusive to one service.

[1995hoo]

There's not a free market in streaming services.  Any given area has only one cable provider, so the customer's choices are just take it or leave it.  No competition on price or service, and the prices and services available reflect that monopoly position.

Setting aside vdeane's valid point that you misunderstood the discussion, your comment isn't necessarily correct. Around here, the cable provider is Cox, but a lot of people opt for Verizon FIOS (fiber optic) instead; both of them offer TV and Internet service (we have FIOS for Internet and phone but not TV).

[JREwing78]

Regarding internet access: there's a donut hole effect forming in Washington. Urban areas generally have good connections due to competition, while rural areas have subsidies and public broadband services that are building out ever-larger fiber networks. I passed by dozens of signs in rural Washington this past weekend advertising rural fiber.

Meanwhile in the suburbs, we're stuck with monopolies and slow rollouts of higher speeds. And no subsidies to help.

Subsidizing it in rural areas is just another example of bad policy, its value is not inverse to population density, quite the opposite.

It's a good thing this attitude didn't exist around, say, the 1930s-50s. Large parts of rural America would not have been able to obtain electricity without the Rural Electrification Act due to then-horrible Return on Investment.  And frankly, it's a good thing that rural telecom cooperatives aren't listening to what a "bad policy" it is to invest in fiber: https://sdncommunications.com/services/broadband-internet

Much of this "donut hole" problem comes down to not having enough investors pushing infrastructure investment, be it public or private.

Private investors want big returns fast for as little investment as possible. The current state of the stock market and its push for quarterly profits drives this mentality. Without heavy taxation driving a need for investors to park their money in investment in fiber infrastructure (among other places), there's little incentive for Big Phone and Big Cable to push themselves out of the areas they get the most profit. There's also not a pool of money begging new operations to go build out fiber infrastructure. Doesn't matter if there's a market if they can't get the cash upfront to build it out.

To some degree, Big Phone and Big Cable will push back against 3rd parties moving into desirable areas that weren't quite desirable enough to build out themselves. They convinced the Tennessee legislature, for example, to block the city of Chattanooga from expanding their fiber footprint despite people wanting it and the city willing to provide it, to protect their market. But by and large, Big Phone and Big Cable hasn't made improvements themselves. So those folks are screwed.

Ironically, the very rural areas are in a better position because the government is footing a big chunk of the investment bill. My parents directly benefited from this investment. They live in a rural area and are served by a electric co-op formed by the Rural Electrification Act in the 1930s. That same co-op got government funding to build out a fiber network along the footprint of their electric services on the same telephone poles, and thus got to join the 21st century. Good thing, because AT&T hadn't maintained their POTS infrastructure (let alone run fiber) and it was falling apart, to the extent that my parents got substantial refunds on their landline phone service for being out so much. Once the fiber was lit, they got phone and internet for 1/2 the price they were paying before, and had the rock-solid reliability of fiber internet service to boot.

So basically, the reason our internet sucks is threefold:
- Not enough investment in infrastructure
- Not enough taxation of the rich to drive investment in infrastructure
- Big Phone and Big Cable are too powerful and block competition whenever possible.

I mean, it's so bad that Elon Musk (someone who's investment acumen could use some help) can actually profit off of launching thousands of satellites to deliver internet, because our wired infrastructure is that bad, and desire for high-speed internet that strong, that people will pay out the nose to get it!

'Murica! F*** yeah!!

[HighwayStar]

Private investors want big returns fast for as little investment as possible. The current state of the stock market and its push for quarterly profits drives this mentality. Without heavy taxation driving a need for investors to park their money in investment in fiber infrastructure (among other places), there's little incentive for Big Phone and Big Cable to push themselves out of the areas they get the most profit. There's also not a pool of money begging new operations to go build out fiber infrastructure. Doesn't matter if there's a market if they can't get the cash upfront to build it out.

More economic nonsense.
By definition a return is standardized for time, so its not "fast" or "slow" its just return.
The fact that profits are quarterly is not a barrier to this investment. If a company can make NPV positive projects happen on an ongoing basis than they will show good results quarter after quarter.
Heavy taxation if anything is likely to make investors not invest at all, you don't incentivize people to invest by taxing them.

In the short term, companies will improve the densest areas first yes, but the problem there is once you have converted to whatever speed in that center then you need additional NPV positive projects. These are found in the more marginal areas. This type of supply/production curve and behavior is extremely well known and there is nothing wrong with it. The optimal areas for expansion are prioritized first, followed by others in order of descending marginal returns.